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The Kudlow Report

News/Business. Larry Kudlow. Larry Kudlow provides his unique perspective on business, politics and investing. New.

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Israel 10, Obama 5, Egypt 4, Washington 4, Turkey 3, Baker 3, Dan 3, Kudlow 2, Us 2, John F. Kennedy 1, Mr. Obama 1, Herbert Hoover 1, Clinton 1, Emboldined Hamas 1, United States 1, Hamas 1, Dwight Eisenhower 1, Jack Jackie 1, Liz Ann 1, Jeremy 1,
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  CNBC    The Kudlow Report    News/Business. Larry Kudlow. Larry Kudlow provides his  
   unique perspective on business, politics and investing. New.  

    November 19, 2012
    7:00 - 7:59pm EST  

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i promised to find you a bull market. see you tomorrow. good evening, everyone. this is the kudlow report. the markets are gambling on a happy ending. the markets roared today. plus there is certainly no deal yet to stop the war in the holy land but cease fire negotiations are reportedly gaining steam. can israel sweep out the terrorists before the plot stops. and paul progress. a 91% tax rate. whoops. wait a minute. we have three recessions. or have you forgotten?
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kudlow style. first up tonight, stocks look very optimistic today. the dow gained 208 points. the s&p 500 surged by 20 points. let's go to liz saunders and brian, the co-founder of shelter capital. welcome back. i want to quote you from my pal and your pal who said on the air this morning on cnbc that if we get a resolution of -- if we extend tax rates, jeremy said the dow can hit 17,000 next year. 17,000 next year. liz ann, i ask you what do you make of that. >> i'm wearing the.
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>> the i do think that the market would react. a true sign that we would have a compromise here. >> what do you think about 17,000? you and i haven't talked in a while. is such a thing possible? >> yes. don't ask me for a time frame but i think it's certainly possible. i think when you think about how this rally has been for three and a half years and many of the participa participants have been sitting on the sidelines. it is, in my mind, easy to envision in light for evaluation. but i think we have got some short term things to get through. >> on the other hand, the "new york times"? do you read it?
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sometimes i do. >> every once in a while. >> they say investors are rushing to sell in order to avoid higher dividend tax rates. the tax rate thing is not going away one way or the other. >> we have certainly seen a lot of selling. the stock market is up 10% but the bond market has not really responded like it has in the past which tells me that people are taking money out of the capital markets which concerns me for any type of sustainable rally. we might have hope and optimism of people coming in. >> it's too early to move.
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>> who knows what could go right, who knows what could go wrong. i just don't see how you make the bet. >> talks about the earnings will be maybe $100 or maybe less than $100 therefore he doesn't think that the market has much upside at all. earnings are the mother's milk of stocks. what do you make of that? what about earnings? >> like we're not dependent on the fiscal cliff enough. if you look at various scenarios, a full can cliff. you go anywhere from no mathematical impact up to 4% or so impact on gdp. that will immediately affect earnings. i think the range could go from up a decent amount to probably down double digits. answer the question on what happens with the cliff and i'd
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have a better sense of what happens with earnings. >> if you can't answer the question, i want you both to weigh in on this. >> that's the problem. and i think a lot -- there is a lot of criticism that analysts are whistling past the graveyard. that may be the case. i don't know that they are in lalaland. i think much like businesses that are holding back on capex and hiring until they figure out what the playing field looks like, i think analysts are doing the same thing. i think it will be a resetting. it may not be bad but we're not there yet. so i think analysts are digging our heels in. >> i don't think anybody knows or can know right now. maybe we will know 12:00 midnight. do you find gold in this story? >> you certainly buy gold here. that is a really good day. if you want to play levered gold. we know that certainly the federal reserve the going to continue to print money.
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the bank of japan will announce something if not tonight then in the next month or so. that is the global theme. the one thing that i would say about the fiscal cliff and affecting earnings going forward is i think it's affecting earnings right now. businesses are already starting to lay off. they're not spending. this is something that we talked about in the summer, larry, that it's already impacting business decisions now. whether we go over it or not is going to be incidental. >> what's your favorite investment right now? >> i think you want to just keep around whatever your core asset allocation is. our message has been stay relatively defensive but don't go all the way to the defensive end of the spectrum. we do like health care. we do like technology. we do like financial. so it's a little bit of a mix. but we're not out there telling any of our investors to be
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hero heroes. >> do you buy gold? >> i agree that the fed is probably going to keep the pedal to the metal. we may see an expiration that they add to qe3 or whatever you want to call it and maybe buy up those purchases. >> i hear both of you saying that. brian says buy gold. you know. thank you for that. now folks, walmart in the news tonight taking action against the retail workers union for generating flash mobs and picket lines at the stores. the national labor relations board is getting involved and calling this a top priority.
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we're going to get you updated but before that, now let's look closer at the optimism about a fiscal cliff deal. is it a real deal? all right. baker, i'll start with you. i'm not sure where you are. but, president obama has made it very clear. he wants 1.6 trillion dollars of new revenues over the next ten years. okay. i would argue in order to get that number, he's going to have to raise tax rates, which the republicans don't want as well as put caps on tax deconductions or loopholes. so therefore we have a mess on our hands. >> not too much of a mess. i'm enjoying the show. we're talking about the tax rates going down to the clinton era. we're creating 3 million jobs a year. the economy is growing 4% a
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year. we take away a few of the tax loopholes. that sounds good to me. basically we have a lot of people running around like chickens with their heads cut off. the economy collapsed because the housing bubble burst. this is all loo loo land here and it is not enough to get worried about but it makes for good news. >> it makes for great news. i also, tim geithner says we can get a resolution of all of this in two weeks. but geithner insists that tax rates must go up. so do the democratic leadership. so speaker john boehner is going to be a lonely guy. >> i think the republicans ought to hold firm against any tax rates. president obama is striding around like he has a mandate for tax hikes but look at house republicans. for 20 years the house republican message has been
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against any tax hikes. voters now where house republicans were on taxes and tax hikes and the republicans retain their large majority so they absolutely ought to hold out against any tax hikes. >> that's a stalemate. >> speaker boehner has said close some loopholes. okay. there are good loopholes and bad ones. the house republicans ought to make sure that there is at least 3 or $4 of every spending cut for every dollar of loophole closing. >> there is no spending cuts. >> that's the thing. they have got to hold firm against that. >> they're talking about 400, $500 billion in revenues, maybe more. that's the republicans obsession. i didn't hear any spending cuts
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at all. >> the loopholes -- cuts in military spending. >> they won't do it. >> president obama has gone along with that. >> but the republicans won't. >> there are spending cuts. >> let me point out a couple things. >> the end of the year -- >> let me say one thing. i would take the sequester. i want to say for the record. i would take the whole spending cut across the board. now please continue. >> okay, so, again, in terms of where we are in terms of the deal, if nothing happens, the status quo is that taxes go up. so president obama doesn't have to bargain here. he got re-elected and for the record, democrats got 500,000 more votes. so you don't have too much of a mandate. i would hate to go out and call that a mandate. where we sit is taxes go up january 31. you have to give president obama
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a good reason to move from that. >> i think republicans have a lot of leverage here. the government runs up about the debt limit in a few months. democrats want payroll tax cut extension. democrats want a lot of things, too. i think there is a lack of seriousness on the spending cut side. harry reed senator majority leader said he's not touching social security at all, which is ridiculous. >> i didn't hear many republicans promising to cut social security in the campaign. >> they're not serious, either. but we need major spending cuts and i think it's unfair to be talking about tax increases when everyone knows there is so much waste and unneeded programs in washington. >> people want to cut social security? not republicans, not democrats, here in washington we have people who want to cut social security? >> it's the largest federal program, social security is.
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it's larger than defense. cut social security, cut medicare, we're going to freeze. >> let me get one in here before we go. i'm reading in the papers today, the financial times that they want business tax loopholes, so-called tax loopholes closed. no rate reduction on the other side. they just want to close them down. of course we're talking about oil and gas and coal. they want $150 billion in revenues. that's going to be on top of the 400 or 500 billion dollars. tax rates may not go up but they're not going down. i tell you, to me this has stalemate. the reason i like this segment very much is the fact is stock market people think this is going to be easy. mr. obama called a couple of ceos over the weekend. i'd say right now there is just as good a chance for a stalemate
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as there is for a solution. last word? >> i'm willing to bet we will get something patched over before the end of the year. worst case over you go over to january 1, 2, 3, no big crisis. we've been through this stuff before. >> thank you very much. coming up on kudlow, with israel and hamas on the verge of a ground war, a cease fire could be within reach. is either side really ready to back down? the country is on the verge of attacks that could throw us into recession? yes. ultra leftist now calling for a 91% tax rate. it is, folks, easily the dumbest thing i have ever heard and don't forget free market capitalism is the best path to prosperity. i'm kudlow. we'll be right back. americans believe they should be in charge of their own future.
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>> there are new signs that an end to the fighting could be
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close. negotiations underway with egypt, israel, and turkey in karyo. can israel really trust egypt or turkey? martin fletcher joins us now. >> larry, it's been another day of bitter fighting between palestinians and israels. they have been continuing to bombard targets in gaza. over 110 palestinians, several hundred wounded. the palestinians at a lower pace than before. the rockets fired at israel today. no serious damage done today. successfully intercepted those rocketsment all of the attention is on the question will israel invade gaza with its army or will there be a truce. there is intense negotiations
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especially in the arab world. trying to get israel and hamas to agree to a truce. but the question now is what will come first? truce or a ground invasion? very close call. everyone, of course, hoping that a truce will take place but an israeli invasion is very much on the coards. >> now let's get some good analysis. we have dan, co-author of start-up nation. dan, welcome back. you know, this whole business about this discussion israel supposedly negotiating with turkey and egypt. a former israeli imbas dambassad in an interview that the rise emboldined hamas in the first place. so how can they negotiate in
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good faith. >> you looked at a percentage of unemployment, particularly among young people, it's in devastating shape. the last thing the egyptian government wants is a war in a region that's on its border in the gaza strip. that's certainly not in the interest of revitalizing the egyptian economy. the west has considerable leverage. you look at the billions of. >> thats, from the united states government. there is leverage there that we have with egypt. however, the reality is, one, president is not evektive. this is all new to him. and two, he is an idealogical soul mate. >> with hamas. absolutely. >> and other regional players. >> this guy has made nasty
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statements about israel. what i'm reading and hearing, dan, you tell me if this is right. that israel itself doesn't want a ground war. but i don't think israel -- how can they trust these guys in egypt and turkey? i just don't believe that. but the israeli people don't want a ground war. >> you're absolutely right. the last thing the israeli people want is a ground war. if you look at from the perspective, one of the big myths is that he's a trigger happy warmonger, highly militant israeli prime minister. if you look at the history of israeli premiers back to the founding of the state, he is one of the most cautious leaders. he is the one leader who actually rarely takes military action and he has been so singularly focused on dealing with the threat from iran, the last thing he wants right now is to get bogged down in a messy ground war with gaza when he
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knows he has got to be dealing with iran in the next eight to nine months. >> having said that, the next question is did israel get done what they needed to get done? knocking off the high command, knocking off the military units and getting to the missile sites. did they get done what they needed to get done? >> based on the conversations i have had with people on the ground they have not gotten it done yet. if they reached a cease fire agreement tomorrow they could still be back exactly where they are now weeks from now. unless they get to an agreement which they think is truly enforceab enforceable. >> do you expect a deal in the next 24, 48 hours? >> no, no, no. if you look at the comments coming out of the egyptian government, they held a
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background briefing today for the press. some of the rhetoric they used in defense of hamas. they are comparing hamas to george washington. they were calling israel terrorists. this does not look like a government that is ready. >> that is the whole bloody problem. you just nailed it. thanks for helping us out. >> good to be with you. >> big business versus big labor. a black friday worker walkout, the nation's largest retailer is fighting back. but can customers expect business as usual at walmart on friday? i don't spend money on gasoline.
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or double miles on every purchase, every day! what's in your wallet? here's your invoice. >> so are federal workers underpaid? let us keep the pay freeze in place. we're going to debate that in about 30 minutes. now facing a black friday worker walkout, walmart is fighting back tonight. the retail giant taking its case to the national labor relations board. courtney has all the details. >> walmart warehouse and store workers announced their intention to stage protests during black friday. walmart filed for an injunction to stop worker protests, claiming the protests are picketing with the intent to get
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walmart to recognize a union. employees are famously non-union. the group is getting advice from the united food workers international union. supporters are taking action to support walmart associates. walmart says the tactics orchestrated by the ufcw are unlawful and will protect associates and. less in terms of priorities for legal authorities. the agency confirms it has sent representatives to headquarters to galter affidavits from walmart officials. then they will decide whether to file a pe addition with the district court for an injunction, stopping the protests on walmart's behalf. the goal is usually 72 hours but this case is more complicated than most.
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>> all right. thanks to courtney. my question is why is it that the unions and the left hate walmart so much? walmart gives low consumer prices, good product quality. it's like a middle class tax cut. entry level jobs, great training for the future. it is such a great free market company that has done so much for this country. maybe because it is that that the left hates it. will they do the union's bidding or will they do their job? >> up next is the economy doing better or worse? where does the so-called recovery go from here? hey! did you know that honey nut cheerios
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>> welcome back. in this half hour, a 1950s style 91% tax rate? 91% tax rate? that's what ultra left economist wants but he forgot that in the 50s, we had three recessions and i think he forgot about the depression, also. meanwhile federal workers underpaid by a third?
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think again. a new study shows that hefty fringe benefits and job security leaves the private sector in the dust. okay. existing home sales up, prices up, home builder confidence on the rise. see those good looking pictures. all good stuff. on the other hand, business investment plunging everywhere and that can't be good. the threat of across the board tax hikes. so where is the so-called recovery go from here? are we getting better or worse? here now is george and dave. currently president of macro strategy. the american economy getting better or worse? >> with a tax hike that appears to be coming, it's getting worse. it's important to remember that existing home sales have been good but new home sales are
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still bumping around barely off 40 year lows. as you pointed out, the soft underbelly as i have been saying on the show for years has been investment and with obama in for another four years, the incentive to commit capital is huge so if the wall street journal said today, investments falling off a cliff. and finally the thing we should be really scared about is the best move for israel not to invade gaza but to attack the dog's owner, namely iraq. >> joe, i know you're going to sing the praises of better housing. and you'd be right. housing is better. you can't have a real recovery. do you know that core capital goods investment today is lower than it was in 2007 and lower than it was in 1999 and 2000? why is it that businesses won't make long term investments any
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more? that tells me this is a so-called recovery. >> you guy will try to make me defend the administration's policy and the fiscal cliff and i'm not going to do it. business spending has been weak. a lot of it has been due to what transpired over the spring and summer with europe. as we moved towards the election, sentiment has gotten weaker and there has been a shut in of activity. housing has been really strong recently and that was the missing lichk through much of the early recovery phase. the economy won't be booming but it will be better. >> i'm not sure what will trigger it. in the election, i think the improvement in the unemployment
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rate helped barack obama a lot and i think people bought into the view that the economy is slowly getting better. that was obama's view at the end of the day and i think it helped him. the question is from here, is the economy going to continue to get better? i don't see how you can get rid of the tax hikes. >> we're supply ciders and a tax hike on top of a weak economy is strychnine on top of arsenic. obama has killed off the roots of the economy. there is no investment going into venture capital, into the base of the economy. we have the big corporations investing in hiring and now their investment is falling off a cliff. that can't be good. i have to ask if these guys won't invest in their own business, what will happen? >> just look at this.
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from normal ordinary main street type people, not, you know, fancy pants wall street, not our crowd but ordinary people out there, is this economy getting better or worse? >> larry, thank you for putting me in your group. but -- >> you know what i mean. >> just ordinary -- larry, consumer confidence is improving. it looks a lot better. within that confidence, one of the things that's important are home prices. that has been cited by many households as being a factor for sentiment to improve. david is exactly right. if, however, larry, we're talking about a comprehensive grand bargain which i think is possible, then i think the economy will do better. it won't be a great economy but
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it will be one that's better. and the incentive for business to invest is the fact that they have invested so littllittle. >> i hope you're right. i will give you the last word quickly. if businesses don't invest, i don't see how you create jobs. i don't see how you have more efficiency and productivity. without either of those, i don't see how family incomes go up. >> you're exactly right. i think we're looking at backwards looking data on the housing market preelection and stock market adjustment and we're looking at forward-looking data on investment numbers. >> i have to jump in. you guys forgot to look at the builder sentiment. for november they were excellent. 1.5 million starts next year. >> i don't disagree.
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i will just say we should be lowering tax rates across the board. >> amen. >> in particular we should be lowering corporate tax rates and small business tax rates. >> that could happen. >> we should be having a lighter footprint on regulations and we should get the president to scream from the mountain tops that he likes business and likes entrepreneurs and wants to help that community. that's what we need. i don't know about the other stuff but that's what we need. incentives and a little confidence from the oval office. thank you. want to hear something really nutty, folks? i mean really nutty. left winged economist now wants a 91% tax rate just like the 1950s. that was in his column today. but he and other lefties forget that three recessions we suffered in the 1950s.
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54, 58, and 60. and it took jfk slashing tax rates to really spur an economic boom in the 60s. oh yeah, paul. did you forget about the great depression? when tax rates went from 25 to 90%? i want to talk about this. that was an unbelievably dumb column. let's talk to america's commitment president. you know, phil, recession in 53, 54, recession in 57, 58, recession in 59 and 60. that's what we got from a 90% tax rate. why does he ignore that obvious history? >> it's pretty strange. usually the 1950s nostalgia comes from social conservatives on the right. now we're getting economic vision. it does not fit the data. it was not a time of great
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prosperity. and of course we were on the wrong side of the curve. there was no revenue. so it's not like that's something to look forward to, either. >> the guy whose praises ought to be touting is john f. kennedy, the democrat. not eisenhower. he had the tax story wrong. j.f.k. slashed marginal tax rates from 91% to 70% and that opened the door to a tremendous boom in the 1960s which eventually lbj twittered away. that's the model. not 90% but lower tax rates. >> they will flood out of the country immediately if you have to raise the rates. you cannot go back to that if you wanted to. >> the other thing that is interesting to me, you know, this is -- i'm being very
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bipartisan tonight. i'm blaming dwight eisenhower. herbert hoover raised the top federal tax rate from 25% to 65%. and fdr kept raising it all the way up to 90%. he raised taxes on businesses. he hated businesses. what do we get? i got a 90% tax rate for the depression. why would i want to emulate that now? >> the other key point is with the income tax up at 90%, that only generated about a third of the revenue that fdr needed iffer the new deal program. things like excise on tires and movies and other things. that's where obama will need to go. no matter how high he raises the income tax rate it will not generate the revenue and he will end up hitting the poor. >> is he channelling an inner
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obama here? you hear a lot of things and see columns. many want 70, 80% tax rates. economists who want a value added tax to finance higher spending and surely mr. obama wants to raise marginal tax rates. is there an inner kreugman that is channelling obama and the second term. >> it's interesting. when obama says go back to clinton rates he means go higher than the clinton rates. and you also have to remember that obama on the campaign trail was saying just a little bit more and now he's saying 1.6 trillion, a number he never told the american people about. his tax ambitions are considerably higher. a little of what is going on is he is trying to define a left flank for obama to make him look more reasonable than other voices out there. some of it is tactical.
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>> i know many don't believe in the incentive model. that if you keep more of what you earn you work and invest more. people in the business working sector will hand the money over to the government and assume that the government will spend the more more than the free market economy would? do they just not trust the free market economy? >> the asusumption is that peope left to their own devices won't spend money correctly. they think they are clever enough to make that work. >> we have seen how clever that was. i hope we don't have to repeat it. thank you very much this evening. by the way, hostess in bankruptcy court today. with more than 18,000 jobs on the line, the judge makes a new ruling. is there going to be a glimmer of hope to save the twinkies?
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we'll take a look when we come back. [ abdul-rashid ] i've been working since i was about 16. you know, one job or the other. the moment i could access the retirement plan, i just became firm about it -- "i'm done. i'm out of here." you know, it's like it just hits you fast. you know, you start thinking about what's really important here. ♪ ♪
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>> a federal judge strongly suggested that hostess and a baker's union agree to mediation. we have been following the
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story. >> larry, hostess is saved at least for one more day. a judge will proctor talks between hostess and a baker's union. here is what hostess ceo had to say today. >> i'm happy to participate in a process where we can explore any possible solution. anything that gets people back to work, i'm all for it. but i can't handicap how it's going to go. >> if the two sides don't come to a deal, then they will reconvene to discuss how to shut down the operations. but in that case, sources say multiple buyers could be waiting in the weings for hostess's assets. they want in on the twinkie and wonder bread brands just not an entire corporation associated with union contracts as well as
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a massive debt load. larry, back to you. >> many thanks. now, should federal workers get a raise? are you kidding? employee unions say yes but the real numbers paint a completely different picture. that's coming up next. [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor,
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>> federal workers are claiming they are underpaid by an average of 35% compared to private employees but another report is out showing exactly the opposite. they are lavishly overpaid. let's talk to jackie simon with the american federation of government employees. all right. the article in the washington post says that you are overpaid when you include all the fringe
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benefit benefits plus you have job security. >> the titled truth about federal pay that contains so little pay. it started by complaining that the salary data didn't include fringe benefit data. the dirty little secret behind the research is that the fact that the federal government doesn't follow the private sector in paying women and minorities less than white men who perform the same jobs -- that's how they conclude that the federal government overpays. the federal government doesn't overpay by any standard. >> let's hear the other side. i don't see how you can do a study without taking all compensati compensation. fringe benefits may be more important than wages and salaries. what is your response to jack
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jackie's criticism. >> the criticism regarding race and gender is a complete red herring. we try to deal every single year that the government puts out a study. every year it says that federal workers are overpaid. >> so what we really want to do and and what we did in this piece is give suggestions for how to do bet err comparisons so they can get federal employees having fair market compensation and to get there you have to know where they stand right now. >> let me just go to this. as i understand it, federal union guys, you got 401 k plus you get pension benefits and they don't hardly pay for either. in other words you get defined pension benefits and you also
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get a 401k. most private sectors don't have both. you get one or the other. how is that possible? >> i would like to respond to mr. ridgewine. use demographic data to make their pay comparisons. job to job comparisons. when you look at the data on what the federal government pays people who perform a particular job and compare that in the non-federal sector that includes the private sector and state and local government and looks at the salaries paid by those kind of employers for people who are performing the exact same kind of job. >> you're not really answering the question i asked. >> you don't want to talk about the fringe benefits which most people nowadays believe are more important than the cash benefits so i will go back. jason, don't the fringe benefits and i will encollude health
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care. very generous health care, 401ks and pension benefits. private sector don't have those advantages. is that true? st that the basis of what you're saying? >> yes. that's one of the major problems with the pay comparison. everything you have heard about the federal sector having better fringe benefits, from this angle you can just forget about it. that's the way the government does it. of course you have to include all compensation. i want to make a point about job to job comparisons. one of the major problems is it opportunity include the skills of the workers that hold those jobs. private workers within a given occupation tend to have greater education and experience than a federal worker. if you don't take that into account you end up with skewed results. >> i think that president obama is right to keep the pay freeze on.
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that's really what i'm hearing. when i look at the skill sets, when i look at the fringe benefits and the wages and salary, i think president obama has this one exactly right. i disagree with you. >> well, federal -- president obama has not proposed to continue the pay freeze. but remember who you're talking about. you're talking about a va nursing assistant who makes around $24,000 a year. you're talking about a border patrol agent or a corrections officer working in a federal prison protecting the public against dangerous criminals making under $40,000 a year. these are the people you're going after or complaining about their very modest salaries and wanting to lower their salaries. but i would like to make a point if i may about the benefits. the cost -- the employer cost for providing those benefits is the way these comparisons are made. and federal pension benefits cost more than a private sector
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provision because we invest solely in treasury bonds. >> you get 401ks and pension benefits and hardly any co-pay. i think it's a hell of a deal. that's it for this evening's show. tham thanks for watching. i'm larry kudlow. we will be here tomorrow night. americans believe they should be in charge of their own future. how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future.
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